[peksun83]

Passed with 57%. Affiliate now !!

[peksun83]

@nomie200031 said:
thnx peksun but technically fcf is not market value is it? examiner shouldnt have used the word market value.
No it said taxable depreciation was dependent on the operating levels. For operating levels we had to take new investments based on additional revenues. We had to calculate extra investments and then we had to calculate taxable profits based on them. because we have to adjust for taxation too in FCF. the question was talking about taxable depreciation which was going to rise in years 1-4 based on operating levels and additional revenue. that was pretty complex. Actually the examiner purposefully used ambiguous wordings. I spent so much time on q1 hoping to do as good as possible. After that when i asked for time as there was no clock there i found only 90 minutes left i had no idea how the 90 minutes were passed. and then i panicked and couldnt concentrate on anything just messed up because i had already realised i was more than half an hour late for question one.

There is no way to calculate the depreciation, as there is no % given. I assumed that tax is 28% of the operating profit. For the additional assets, it is depend on the increament of the operating revenues. Market value = Present value of FCF for the first 4 years + terminal value after 4 years. I am no longer hope for 80% tho..just hoping for 50% lol…

[peksun83]

@nomie200031 said:
what did you guys do for the depreciation it wasn’t increasing at the same rate as revenue and other op costs so i guess for fodder we had to do depreciation calculations separately Then the other thing i found weird was it said the beta equity for combined company should be wighted based on market values of two companies respectively. where was the market value for fodder it was unlisted ..

The depreciation is same as the replacement value, so there is no adjustment made to the FCF. The market value for Fodder Co. is calculated using FCF.

[peksun83]

@magyverlast said:
Pretty much horrible paper on the first sight but i think as you try to read and grab things up many us would had managed…..
Q1. i think in part a of the report he was requiring you to calculate present value of free cash flows till perpetuity of fodder co, add this up with the value of pursuit company which was given and then compare this sum with the value of the combined company…….if the value of combined company was less than the sum, than the acquisition was not beneficial for shareholders of pursuit co. i think the combined value was less than the sum of individual……we had to find growth rates by this formula: sales revenue 3=sales revenue(1+g)^3. limitation included: CAPM limitations, growth rate assumptions, constant margin assumption, real options ignored etc………than what we had found out in part as value of fodder, add 25% premium and deduct from cash reseves of pursuit co to find out how much using bond finance was required…….i hope ive done it right……
Q4 was quite confusing only to the extent of timing of cashflows…….i took 7 in year 0, 7 in year 1, 35 in year 2, and all the cash inflows from year 3 onwards…….this way i got a negative npv of 2.99…………than i took present value of cash inflows as Pa, and present value of investment as Pe, t as 2, and got 6.44 as value of option to delay, and i concluded that if option was incorporated in valuing project positve npv of 4 would result, and talked about its limitations and change of decision in part b.
Q5. Didnt had enough points, my head got absorbed till this point:
a) Fishermen interests, may give them employment
b) share options, agency problem
c) water pollution
d) wildlife

Q2. was a bit confusing except part a and c……in part a we just had to use bid forward rate, i futures we had to find expected lock in rate…..i think basis was 0.0008 and 0.00016 at closing date……..options required call options…..and was a detailed working……
PLEASE GIVE FEEDBACK

Honestly, the paper is not technically complex. It is fairly easy, however tricky and very time consuming to absorb the information given.

I have attempted the paper the same way you are.

Q1) calculated the fcf of fodder co. and then the combined firm. However, I am not sure did I miss out or there is really no operating profit margin given for Fodder Co. but for combined company it is 30% of sales. For the Fodder Co. I got the value of the firm of approximately $104m++, while value of the combined firm at $366m. Hence there is synergy which concluded that the acquisition is beneficial.

Q2) Fairly straightforward too. The basis risk is 0.0080, and the remaining basis risk is 0.0080/5 = 0.0016. However, didnt finish part d), just managed to get half of part d). For part a), forward contract is the most benefit.

Q4) I got the same answer as you, although I made quite a lot of mistake in the beginning, cuz I missed out that the cash flow is start from Y3. However, cancelled it, and corrected. I have discounted the investment too, 7+7+35, although now I doubt whether should I discounted it or take the full cost.

Q5) Stakeholder – fisherman welfare
wildlife
the strategic fit of the project
political risk.

Hope to get 50% though.

[peksun83]

The 2 asset portfolio is not explained in both Kaplan and BPP book. Is it examinable? Can anyone tell me what is w, s and r implied for, and what is the formula used to derive for?

Thanks~!

[peksun83]

@dookiecookie said:
Hi there!

I used Lewin’s models in question 1 part b (ii) I think? part b (i) was the change klaideoscope? I am hoping anyway!! 🙂

@point1990 said:
aite folks now am extremely scared…outta the 60+ posts, it appears that no one has even closely thought / spoken of Lewin’s strategic change model i.e. unfreeze, refreeze etc & Lewin’s resistance to change forces :)…I wrote that for Answer 1b…after reading all the feedback at ot…I think I just lost all the 15 marks 🙁

same for me, I used Lewin model in 1 b (ii)…hopefully we get it right…or I lose totally 25 marks in Question 1 -.-..But in Kaplan text book, element of change management is in cultural web…this exam really makes me scare..

[peksun83]

@yuvraj108 said:
Overall exam was fair but definitely a time pressured one.

Q1a. asked about str. position so we are allowed to use any model which will give some ideas, thus SWOT in my opinion is best with a mixture of Ash bridge that what sort of business they holding.

b. contextual feature: need to talk about balogun and hope
c. elements: which includes general aspects like changing management, bringing shareholder opinion, educating the staff, involving them in the process etc.
d. this part is about general talk on how parent develop strategy, ashbridge have given some clues.

Q2: a. general points, easily picked from questions
b. need to talk about marketing mix and how it will help in the e-business,
eg: product can viewed online, thus cost down, will reach more people and hence the cash flows

Q4: a. general points about benefits and costs:
these includes cost of overall operation down and cost includes bespoke software, proving laptops to students etc.
d. its about project management that why is it necessary
general points required: eg will be helpful achieve cost, time and quality constraints.

thats all I did and hoping for good results

I hope you are right about Part 1 (b) ii, to educating the staff, participating all that, at least I still could save few marks out of 25 marks that down to the drain, because I used Lewin change management in this question, including the suggestion ti educate the staff..

[peksun83]

@alpeshr82 said:
it was a nightmare for me. no idea what to write in part b of section A.
contextual factors? absolutely clueless. didn’t even understand the question to have a confident stab at it.
ended up writing about the cultural web, only thing I could think of.

did anyone else think the section b was quite narrow in focus? 2 questions on e-business. yet there had been recent articles on competencies, project management.

were those articles put in to throw us off?

same for me, clueless about contextual factor, which didnt appear at all in Bpp’s text book…finally just write about cultural web..and B(ii), write about lewin change management… While Q3(b), dunno what the question wants…wasted 35 marks..hopefully still get 50 out of 65 marks -.-

[peksun83]

consolidated cash flows, very tricky and also the comment on the usefulness of the direct cash flow compared with the indirect cash flows. (It is stated in Kaplan text book, that direct cash flow will not be examined, and there is no detail of direct cash flow at all in Kaplan’s text book) -.-
Hopefully, still get 50/50 marks..
on Section B..SME, Share based payment, Fin instruments (hedging) and another question on 3(b) 10 marks, which I don’t understand

[peksun83]

@murat said:
Q1 on restructuring. How is used the fact that the bondholders will contribute 90 mill cash?
Couldn’t it be understood that they will purchase new bonds for 90 mill?
It probably meant that they will get new shares worth 270 mill paying only 90 mill. But from the text of it the first is also possible. Isnt’t it?

They are not purchasing new bonds…they are converting their existing bonds into equity. Rather than lose more than half of their bond value (unable to recover), by contributing 90m in cash, they are able to convert it into equity, and being a majority shareholder with voting rights and participate in the company’s profit.

[peksun83]

the P4 question is uploaded on acca website :-
https://www.accaglobal.com/pubs/students/acca/exams/p4/past_papers/p4/p4_2010_dec_q.pdf

can restructure the answer to check the mark..

[peksun83]

@change said:
Re delta hedge – i did more or less the same as you (no. of shares / (delta * multiplier)) so it must have been either I didn’t add/subtract to 0.5 to my table reading (or you didnt?!) or I did something wrong at the BSOP calc.s. > i’m taking it from BSOP and didn’t think we needed put call parity calcs, but some other poster mentioned it elsehwere. I think i’m def wrong about shorting calls tho – that was stupid of me! But hey, its worth 7 marks so prob got 4 anyways.

Re question 2 APV, my results were susp. negative in fairness, that working capital was dragging the whole thing down so yours looks more lkely there. Kudos.

What did you do for the MBO/restructuring valuations tho? Would love to know how you tackled that?

Did you get anything done for q’4 at all? Surely you had a stab at it! Also, was gonna waffle q5 but i figured it would just take up way too much TIME!

For delta value (Q3(a), subtract from 0.5, because it is N(-d1) and it is a share put option.

Part 1(a), all the payable have equal claim over the net realisable value of the assets (as non going concern) and less the redundancy cost of 54m. shareholder get nothing.
2(a) Prepared the Financial position of the Doric Co. after the restructuring, with surplus of cash at bank of $20m, after the capital investment. and also prepared the income position. However, for the value of the company, I suppose to do FCF, which exclude the depreciation. I forgot to exclude the depreciation, but I still use this formula FCFx(1+g)/ke-g to get the value of the firm. Hope the examiner just penalise me 1 mark for this.
Q1(c) need additional fund of $152m..and again income position, just like Q1(b) above.

Q2(a) I guess I got the positive Base case NPV because of the realisation of the project for I guess $16m if I am not mistaken, and also the recovery of the working capital at the 4th years.

Q4 (a) I did some calculation up to the income of the subsidiary before the proposal by T.E, maybe get 3 or 4 marks only..

Later still need to attend P2 exam -.-

[peksun83]

@change said:
This was decimation! Its a total cointoss if I get over the line of not, heres what I got, lemme know what ye think;

Started with q2 – APV at 10%, working capital made everything negative? The PV of the interest relief, the PV of the Govt grant, the PV of the lost tax releif due to reduced interest costs, the issue costs, a present NPV overall..but only because of the subsidisation. Re decision – invest but question the exit strategy – where is the 16kk coming from? Is it valid? Is the Govt grant for sure and certain for hte whole of hte life etc? Then typical APV assumptions re M&M – tax exhaustion, bankruptacy risks, agency issues yadda. Of the 25 marks, I think I might have got 20.

Next stop, q3. Delta hedge. Liek a previous poster said – something like 348 shares. I think it was ending in 0.1 anyways so slighlt underhedge. I said No. of call options to sell (i dont think this is correct tho) and a bit about the symmetrical and offsetting payments to make the portfolio indepenedent of the underlying. Threw in that delta changed constantly also as a caveat. OF the 13 marks I tried to come up with some points, probably made three for each so maybe 3*3. Of hte 20 I prob go (5+9) = 16. Total thus far, 36 baby!

Question 4, DTR and all that jazz. Sloppy as hell TBH. Got (-) cashflows after capex, it was ((net profit + 75% of after tax profits on sub 1) less the capex) and then (net profit + 75%(after tax proifts on sub 1 after markup of 40% on sub two’s goods) + 75%(sub two’s profits with the mark up) less the cap ex again). I forget to add the additional tax on repatriation to home country on both scenarios. Of the 14 I prob only got 4, lets make it 2. Second part re discussion – I said intutively there will be less cashflow as more of the co’s profits are taxed in a higher country, this may be good for non-financial reasons re media/pr etc and it may motivate that sub2 to be more productive due to perofmrance measurement etc, i said transfer pricing and management overheads etc plus to move any group losses to thiscountry to work againts this higher tax. OF the 6 marks, i guess I got 4. That makes 6 out of 20 – not cool but the cum. is 42…baby!

Finally, to q1 , did the format report but was messy messy so maybe 1 of 4 marks, part 1 was write down the assets, pay off the employees redundancies (super-preferential treatment to the blue-collar proles!!) then I got lazy and said that the bank OD had a floating charge so nadda for the debtholders and zip for the equity holders – i prob got 2 of the 3 marks – hey, its a lazy assumption! Re restructuring, stick in the new “financed by” section, new share issues bring up the bank/cash and assumed no write down to NRV since the company contines. I also put in the additional profits (7% pa?) in perpiutuy at the new discount rate (12% minus the 2% mentioned) and added that to the assets on the ne wb/s. Of the 8 marks…I expect maybe 2. Re part three, MBO, same thing, halfed the assets, added the additional profit in perp. to it and stated my obious (simplistic) assumptions. I expect 1 mark there. The last 12, a good bit of risk/return preferences, yadda yadda re equity liek a call option, stuff liek how the directors want the co. to surive to avoid any fradulent trading investigations etc and went with MBO, not coz my (shoddy) calc.smind you but for ideas like managers would pay a bigger premium for (i) depsration to keep their jobz and (ii) winners curse bidding up, (iii) use the money to restructure the remaining sections (iv) good for the shareholders to split the co.s – greater clarity (v) use the revenues to delverage the remaining co.’s d/e – of the 12 I expect maybe 8 – that be 14 from 35 and brings my total to 56

…but who knows – have I made some msitake somewhere there? Let me know peeps.

Stay cool

Part 2(a), I discounted at 10% cost of equity too..but positive Base case NPV. and then overall, it is positive APV. Part 3(a), however, I get 420 put option contracts, with delta N(-d1) of 0.4761. 420 = 200,000 / 1,000 x 0.4761.. and the put option premium is 0.29 each…I am not sure whether it is correct or not, but my classmate get the same answer. How do you get 348 contracts tho? Question 1 , I suggested that Proposal 2 is the most likely to be suggested, after all the restructuring result. Question 4 is a disaster, run out of time.

[peksun83]

For Part 3 (a), I got the N(-d1) and got something like 420 put option contracts…and for part 3(b), I calculated the put option contract price as well..I hope I get a good mark for question 1-3 , as I didn’t complete Question 4 , due to run out of time..

[peksun83]

Been trying for 3 days….worrying sick, as the closing date is due soon..

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